Tyco International has agreed to buy Broadview Security for approximately $2 billion in a deal that will help the company corner a quarter of the residential security system market in North America.
The deal will bring together the two industry leaders in residential security system monitoring.Tyco's subsidiary ADT is already the market leader in North America, according to Dow Jones Newswire. Last fiscal year ADT's North American residential and small business operation had revenues of $2.2 billion last year, while Broadview's revenues were about a quarter of that.
Analysts say the deal makes good business sense for both companies.
"For Tyco and its subsidiary ADT security, the deal means adding the No. 2 player to its already No. 1 position in residential security systems, which is Tyco's largest revenue-producing business group," the newswire reported. "And for Brink's Home Security it means avoiding a costly, and potentially subscriber-losing, brand name change, along with the 36% premium being offered."
In a conference call with reporters, Naren Gursahaney, president of ADT Worldwide, said Broadview was acquired for three things: 1) " a high quality customer base that delivers solid, recurring revenue," 2) "an account generation and service engine that adds to this customer base everyday," and 3) "operational and tax synergies."
Gursahaney expects the deal to be final by the second half of this fiscal year after approval by regulators and Broadview shareholders. Both companies boards have already approved the transaction. When the deal is finalized, Tyco will merge Broadview into ADT. Broadview's shareholders will have the option of receiving $42.50 in cash, Tyco shares, or a combination of the two, according to Bloomberg.com. Tyco is paying Broadview shareholders 36 percent more than what a share closed at on Jan. 15.
The market approved of the acquisition today with Tyco closing up 1.73 percent at $38.19 and Broadview shares jumping to $41.54, up 32.21 percent.
